Central Petroleum Limited Quarterly Activities Report
Brisbane, Australia (ABN Newswire) – Central Petroleum Limited (ASX:CTP) (FRA:C9J) (OTCMKTS:CNPTF) Quarterly Activity Report and Overview of Operations for the quarter ended December 31, 2022.
– Palm Valley drilling success: The Palm Valley 12 P1 lateral well was successfully completed, connected to the Palm Valley processing facilities and flowing gas to the market at more than 10 TJ/day from the end of November.
– New gas sales agreement: A new gas sales agreement for the sale of 0.55 PJ of gas to South32 over two years from 1 January 2023 has been executed.
– Cash balance at the end of the quarter was $13.7 million, compared to the $15.6 million balance at September 30, 2022:
– Lower net operating inflows of $0.2 million (before exploration and financing costs) as the temporary closure of the Northern Gas Pipeline (NGP) limited sales volumes and annual insurance and staff incentive payments were made.
– $0.8 million of capital expenditure, which mainly sustains CAPEX.
– Net financing payments of $1.0 million after drawing down $1.0 million under the extended financing facility.
– Sales volume was 8% lower than the previous quarter at 1.07 PJe (Petajoule equivalent) as the temporary NGP outage extended into mid-December, preventing gas sales to east coast customers for most of the quarter.
– Sales volumes are expected to recover in the March quarter as the NGP is now fully operational and Palm Valley gas production has received a boost following the commissioning of the new PV12 well at the end of November.
– Unit sales prices across the portfolio fell from the extraordinary spot market driven peaks of the previous two quarters to an average of $6.78/GJe (Gigajoule equivalent) as Central was unable to access east coast customers and spot markets due to the NGP outage. .
– Sales revenue of $7.2 million for the quarter was 23.2% lower than the September quarter, reflecting the lower volumes and softer realized prices.
– Debt facility increased by two separate tranches of $6 million to finance increased production across Central’s Amadeus Basin gas projects. An initial $1 million was withdrawn to trigger the first tranche in December, with the second tranche remaining subject to satisfaction of certain conditions precedent.
– Net debt was $16.8 million at December 31, up from $15.1 million at the end of September reflecting the lower cash balance.
– Strategic Review: The Board has initiated a strategic review of Central’s asset portfolio, growth strategies and capital structure. RBC Capital Markets has been appointed as an advisor and is working with Central to assess various options to realize value for shareholders.
Message from Managing Director and CEO
“The last quarter of 2022 brought a mix of new challenges and opportunities for Central Petroleum, and I think on balance, it’s fair to say we ended the quarter in a better position than where we started.
In early October we performed the first flow test from the final appraisal end of our PV12 well at Palm Valley which was unsuccessful in reaching its deep exploration target and we have been very pleased with the results so far. The well was flowing gas in excess of 11 TJ per day, well above our pre-drilling expectations. The well was successfully connected to our Palm Valley facilities and has been flowing gas to customers since late November.
This well increased gas production at Palm Valley from 5.5 TJ/d to the maximum facility of 15 TJ/d in January (Central’s 50% stake: 7.5 TJ/d). This extra production will provide welcome cash flow for Central in the coming months and also provide new gas supplies for Australian customers. The performance of this well should enable Central to book new gas reserves by mid-year and supports the drilling of more wells at Palm Valley to target additional gas reserves.
After the many challenges encountered during the exploration drilling portion of the program, this is a very welcome outcome.
We started the quarter with the Northern Gas Pipeline (NGP), our gas transportation route to eastern markets, being shut down by the operator for safety reasons related to low flow rates, limiting our non-firm gas sales to customers in the Northern Territory. Fortunately, we were able to redirect most of our non-firm gas to users in the NT to minimize the impact of this pipeline outage on Central’s sales volume over the quarter.
Despite these sales, the disruption to the NGP did mean that our overall gas sales volumes and revenues for the quarter were lower than previous quarters that benefited from record market prices. With the NGP reopened from mid-December and Palm Valley production volumes now double those of November, we expect revenues to recover in the March quarter.
The Board and management continue to work with RBC Capital Markets to evaluate various opportunities to crystallize value for shareholders. I am sure our shareholders will appreciate that a measured approach to these activities is necessary and it would be counterproductive for us to speculate on timeframes or outcomes at this time.
However, at the same time, in parallel with the strategic review, we continue to create value through our portfolio of assets. Plans are progressing to increase capacity at Mereenie within the next twelve months by re-commuting existing wells and new development wells, subject to final approval of the joint venture. To fund this activity, we successfully agreed to an extension of our debt facility by up to $12 million in December in two equal tranches of $6 million, with the second tranche remaining subject to conditions precedent before it can be drawn down.
Preparations continue for the three Amadeus Basin subsalt exploration wells scheduled to start later this year. With the Peak Helium farm providing critical funding for this program, the final commitment to these wells is tied to outstanding regulatory approvals expected in the first quarter of 2023.
We continue to prioritize our resources on activities that are more likely to realize shareholder value and will divest our large exploration portfolio – specifically our interests in the Southern Georgina Basin in western Queensland and the Ooraminna retention leases in the Amadeus Basin. The past results in these permits, together with the changing regulatory regime and high financial obligations, led us to conclude that our efforts and resources should be focused on our other opportunities. Similarly, we have allowed our arrangements to support the proposed Amadeus to Moomba gas pipeline to lapse and will revisit them once we better assess changes to the regulatory regimes and results from the subsalt exploration program become available.
The volatile energy markets from mid-2022 have led the federal government to introduce a framework to limit gas prices going forward. Given that Central’s gas is largely contracted for 2023, no material impact on revenues is expected at this stage, and note that the Price Order will be reviewed in mid-2023 and the $12/GJ price cap is greater than Central’s current average realized portfolio price ( $6.78/GJ in the December quarter). Central is seeking further clarification of the new regulations to support gas contracting for 2024 and beyond.
So we start 2023 on a positive note, with increased production from our PV12 well selling in a strong gas market and with the start of a major sub-salt exploration program to look forward to this year. We look forward to sharing our progress with shareholders as the year progresses.”
*To view the full quarterly report, please visit:
About Central Petroleum Limited:
Central Petroleum Limited (Central) is a well-established and emerging ASX-listed Australian oil and gas producer (ASX:CTP). In our short history, Central has grown to become the largest onshore gas producer in the Northern Territory (NT), supplying industrial customers and senior gas distributors in NT and the wider Australian east coast market.
Central is positioned to become a significant domestic energy provider, with exploration and development plans across 180,000 km2 of tenements in Queensland and the Northern Territory, including some of Australia’s largest known onshore conventional gas prospects. Central has also completed an MoU with Australian Gas Infrastructure Group (AGIG) to progress the proposed Amadeus to Moomba gas pipeline to a Final Investment Decision.
We also seek to develop the Range gas project, a new gas field located between proven CSG fields in the Surat Basin, Queensland with 135 PJ (net to Central) of development-pending 2C contingent resource.
Central Petroleum Limited
Investor and Media Inquiries: Greg Bourke: +61-478-318-702 Sarah Morgan: +61-421-664-969